2019 (11) TMI 210 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 - HELD THAT - No reference to the assessee for providing any accommodation entry. The A.O. in the re-assessment order also mentioned that information provided by the assessee at re-assessment proceedings stated that details of accounts as reflected in the statement provided showing transaction in bank account of ₹ 10,24,42,961/-. Therefore, contention of the Assessee is correct that this is the amount which has appeared at credit side of the bank account of the assessee. A.O. has taken the entire amount deposited in the Bank account of the assessee as accommodation entry without verifying any fact. The assessee explained before A.O. that the amount in his Bank account reflected on credit side pertain to sales, share application money, income and amount received back from the parties i.e., paid for purchases. Therefore, A.O. did not apply his mind to the information received from Investigation Wing. Assessee also explained before the authorities below that ₹ 80,50,000/- in respect of 16 parties have not been mentioned in the information supplied by the Investigation Wing, then there were no reason for the A.O. to say that both these amounts are accommodation entries received by the assessee in assessment year under appeal. These facts clearly show that A.O. recorded incorrect facts in the reasons recorded for reopening of the assessment. There is no independent application of mind by the A.O. to any tangible material which form the basis of reasons to believe that income chargeable to tax has escaped assessment. The conclusion of the A.O. are at best re-production of the conclusion of investigation report. A.O. in the reasons has not recorded as to from whom assessee has received unaccounted money. The A.O. has merely referred to Annexure-A in the reasons which is credit side of the bank account of the assessee which ultimately found to be correct that the entire bank deposits are not accommodation entries. There were no proceeding pending before the A.O. at the time of recording of reasons, thus, there was no reason for assessee to establish the creditworthiness of the Investors as is noted in the reasons. - Decided against revenue

Issues Involved:
1. Reopening of assessment under section 147/148 of the Income Tax Act.
2. Addition of ?3,27,74,500 under section 68 of the Income Tax Act.
3. Validity of the assumption of jurisdiction by the Assessing Officer (A.O.).
4. Examination of documentary evidence and remand report.
5. Deletion of additions by the Commissioner of Income Tax (Appeals) [CIT(A)].

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147/148:
The assessee challenged the reopening of the assessment, arguing that the A.O. acted solely on information from the Investigation Wing without independent application of mind. The reasons recorded for reopening included the modus operandi of entry providers and the conclusion that the assessee had taken accommodation entries. The A.O. did not establish any nexus between the material and the alleged escapement of income. The Tribunal found that the reasons recorded were based on doubts and suspicion, and the A.O. had not applied his mind independently. The Tribunal quashed the reopening of the assessment, citing judgments such as Pr. CIT vs. G and G Pharma India Ltd. and others.

2. Addition of ?3,27,74,500 under Section 68:
The A.O. made an addition of ?3,27,74,500, including ?3,24,50,000 on account of share premium and share capital, and 1% of this amount as unexplained income. The A.O. rejected the documentary evidence and confirmations filed by the assessee, stating that the investors did not appear for verification. The CIT(A) deleted the addition, noting that during remand proceedings, 22 parties appeared before the A.O. and confirmed their investments. The Tribunal upheld the CIT(A)'s decision, emphasizing that the A.O. did not conduct further inquiries into the documentary evidence provided by the assessee.

3. Validity of Assumption of Jurisdiction by the A.O.:
The assessee contended that the A.O. did not properly appreciate the information received from the Investigation Wing and that the reopening was based on incorrect facts. The Tribunal found that the A.O. recorded incorrect facts in the reasons for reopening, such as the entire amount of ?10,24,42,961 representing income chargeable to tax. The Tribunal concluded that there was no independent application of mind by the A.O., and the reopening was invalid and bad in law.

4. Examination of Documentary Evidence and Remand Report:
The CIT(A) examined the remand report and noted that the A.O. did not furnish copies of statements on oath of the shareholders recorded during remand proceedings. The CIT(A) accepted the assessee's explanation that the share application money was genuine, supported by affidavits and confirmations from investors. The Tribunal agreed with the CIT(A), highlighting that the A.O. did not make any further inquiries on the documentary evidence filed by the assessee.

5. Deletion of Additions by the CIT(A):
The CIT(A) deleted the additions made by the A.O., including ?29 lakhs pertaining to an earlier year and ?80,50,000 not included in the information from the Investigation Wing. The Tribunal upheld the CIT(A)'s decision, noting that the A.O. did not investigate the documentary evidence provided by the assessee. The Tribunal dismissed the Revenue's appeal, as the CIT(A) had already deleted the additions on merit based on the evidence on record.

Conclusion:
The Tribunal quashed the reopening of the assessment, upheld the deletion of additions by the CIT(A), and dismissed the Revenue's appeal. The Tribunal emphasized the importance of independent application of mind by the A.O. and proper examination of documentary evidence in reassessment proceedings.

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